WisdomTree AND SMART BETA
WHAT IS SMART BETA?
Some define smart beta as simply any type of index that is not market capitalization weighted. In our opinion, there are many types of smart beta approaches, and the ones we believe are attracting the most attention currently are:
Equally Weighted Indexes
Components are often selected from established indexes such as the S&P 500 but are equally weighted so that all components have identical weights when rebalanced.
Fundamentally Weighted Indexes
Components are selected to provide broad exposure to an equity market based on market capitalization, but companies are weighted by a fundamental factor such as aggregate dividends or earnings.
Components are selected based on one or more fundamental factors and are weighted based on one or more fundamental factors. Factor-based indexes can also be modified equal weighted, where stocks are first divided into tiers based on certain factors and then equal weighted within those tiers.
Low Volatility Indexes
Components are selected because they have exhibited lower volatility than the overall stock market and/or are weighted based on their historic volatility.
OUR SMART BETA APPROACH
It can be challenging to differentiate between smart investment approaches and smart marketing. When it comes to identifying smart beta, we think investors should look for:
|DTD||U.S. Total Dividend Fund|
|DLN||U.S. LargeCap Dividend Fund|
|DON||U.S. MidCap Dividend Fund|
|DES||U.S. SmallCap Dividend Fund|
|DHS||U.S. High Dividend Fund|
|DTN||U.S. Dividend ex-Financials Fund|
|DGRW||U.S. Quality Dividend Growth Fund|
|DGRS||U.S. SmallCap Quality Dividend Growth Fund|
|QSY||U.S. Quality Shareholder Yield Fund|
|EXT||U.S. Total Earnings Fund|
|EPS||U.S. Earnings 500 Fund|
|EZM||U.S. MidCap Earnings Fund|
|EES||U.S. SmallCap Earnings Fund|
|USMF||U.S. Multifactor Fund|
Developed World EX-U.S.
|DWM||Intl. Equity Fund|
|DOL||Intl. LargeCap Dividend Fund|
|DIM||Intl. MidCap Dividend Fund|
|DLS||Intl. Smallcap Dividend Fund|
|DTH||Intl. High Dividend Fund|
|DOO||Intl. Dividend ex-Financials Fund|
|IQDG||Intl. Quality Dividend Growth Fund|
|EUDG||Europe Quality Dividend Growth Fund|
|EDOM||Europe Domestic Economy Fund|
|DFE||Europe SmallCap Dividend Fund|
|DFJ||Japan SmallCap Dividend Fund|
|AUSE||Australia Dividend Fund|
|DEW||Global High Dividend Fund|
|DNL||Global ex‐U.S. Quality Dividend Growth Fund|
|GSD||Global SmallCap Dividend Fund|
|DRW||Global ex-U.S. Real Estate Fund|
|AXJL||Asia Pacific ex-Japan Fund|
|DVEM||Emerging Markets Dividend Fund|
|DEM||Emerging Markets High Dividend Fund|
|DGS||Emerging Markets SmallCap Dividend Fund|
|DGRE||Emerging Markets Quality Dividend Growth Fund|
|EMCG||Emerging Markets Consumer Growth Fund|
|EPI||India Earnings Fund|
|XSOE||Emerging Markets ex-State-Owned Enterprises Fund|
|CXSE||China ex-State-Owned Enterprises Fund|
|WCHN||ICBCCS S&P China 500 Fund|
|GULF||Middle East Dividend Fund|
|JHDG||Japan Hedged Quality Dividend Growth Fund|
|DXJS||Japan Hedged SmallCap Equity Fund|
|DXJF||Japan Hedged Financials Fund|
|DDWM||Dynamic Currency Hedged Intl. Equity Fund|
|DHDG||Dynamic Currency Hedged International Quality Dividend Growth Fund|
|DDLS||Dynamic Currency Hedged Intl. SmallCap Equity Fund|
|DDEZ||Dynamic Currency Hedged Europe Equity Fund|
|DDJP||Dynamic Currency Hedged Japan Equity Fund|
|AGGY||Yield Enhanced U.S. Aggregate Bond Fund|
|SHAG||Yield Enhanced U.S. Short-Term Aggregate Bond Fund|
|WFIG||Fundamental U.S. Corporate Bond Fund|
|SFIG||Fundamental U.S. Short-Term Corporate Bond Fund|
|WFHY||Fundamental U.S. High Yield Corporate Bond Fund|
|SFHY||Fundamental U.S. Short-Term High Yield Corporate Bond Fund|
|EMCB||Emerging Markets Corporate Bond Fund|
|ELD||Emerging Markets Local Debt Fund|
|ALD||Asia Local Debt Fund|
Interest Rate Strategies
|AGZD||Interest Rate Hedged U.S. Aggregate Bond Fund|
|AGND||Negative Duration U.S. Aggregate Bond Fund|
|HYZD||Interest Rate Hedged High Yield Bond Fund|
|HYND||Negative Duration High Yield Bond Fund|
|USFR||Floating Rate Treasury Fund|
|WBAL||Balanced Income Fund|
THE HISTORY OF SMART BETA
Though you may just now be hearing about smart beta ETFs, they have been around for some time. In fact, WisdomTree was an early pioneer in this category, inventing the concept of dividend weighting equity markets.
THE BENEFITS OF SMART BETA
Investment managers and investors alike are always looking for better ways to invest. Indexing can be highly efficient, and ETFs have a number of benefits that make them a wise way to invest and have led to their quick adoption and impressive industry growth.
THE FUTURE OF SMART BETA ETFs
While some industry insiders may worry that smart beta is a fad, investors do not seem to agree. Consider that:
2Source: Marketwired, 12/11/13.
3Source: Donald Jay Korn, "ETF Asset Growth Rate Sprints Ahead of Mutual Funds," Investor's Business Daily, 10/25/13.
4Source: Investment Company Institute, as of 11/30/14.